Legal Issues in AL and Bella Vista Case

This executive summary discusses the New Zealand legal system, the effect of the Romalpha Clause, and the legal avenues available to AL to claim against Bella Vista for non-payment of the Steel Structures.

PART: A
Subject Matter:
There are two companies: Aluminium Ltd (“AL”) and Bella Vista Homes Ltd. (“Bella Vista”).
AL, an Australia based company, has supplied prefabricated galvanized steel structure (“Steel
Structures”) to Bella Vista (5379301) in Liquidation and has not been paid for it.
As in the issue, “Prior to supplying the Steel Structures, AL forwarded the contract to Bella Vista
however Bella Vista did not sign the Contract. Upon receiving the Contract, Bella Vista emailed
to AL details of the Steel Structures required and AL duly shipped the Steel Structures to Bella
Vista. The Contract includesthe following Romalpha Clause ‘Title to the Goods shall remain
vested in Aluminium Ltd and shall not pass to Bella Vista Homes Ltd. (5379301) until the
purchase price for the Goods has been paid in full and received by Aluminium Ltd’.” This
executive summary is about the following three issues:
a. The New Zealand legal system,explaining the applicable law to the scenario above;
b. The effect of the Romalpha Clause
c. Legal avenues available to AL to claim against the shareholders and directors of
Bella Vista for non payment of the Steel Structures.
Analysis:
“The whole body of existing English law, both legislation and common law, as well as the
English constitutional conventions, was received into New Zealand on 14 January 1840. For
some time, the Parliament at Westminster legislated for New Zealand, but from 1865, New
Zealand received limited legislative powers of its own. In 1931 the United Kingdom Parliament
passed the Statute of Westminster, to facilitate a move towards independence for the Dominions
(former colonies) by removing the limitations on their legislative powers. In 1947 New Zealand
passed the Statute of Westminster Adoption Act and accepted full responsibility for its own
destiny. Until very recently, New Zealand continued to look to the mother Parliament at
Westminster for sources of its own legislation, and to the superior English courts for precedents
in its own courts. House of Lords and (English) Court of Appeal decisions are still highly
persuasive, and English decisions are still often cited in New Zealand courts.”
“As the world of electronic commerce expands there is an increasing demand for clarity in the
rules which apply to the participants and their transactions. Uncertainty exists on such matters as
whether agreements entered into electronically are enforceable, how the operative terms of on-
line contracts will be determined by courts, what rights parties have to on-line information, and
what electronic self-help remedies they may exercise. The increased costs of dealing with these
new legal uncertainties may offset any reduction in costs achieved through the use of new
technologies and, as a result, may slow needlessly the rate at which businesses are willing to
implement new technologies. Much of the demand for the development of a legal framework has
come from those who use electronic commerce and want assurances that electronic transactions
will be valid and binding as well as certainty about the rules and remedies that apply to their

transactions. If the communication was made by email the answer depends on whether the email
user had direct and immediate access to the person to whom the email is sent or whether the
email was sent through the electronic equivalent of the postal service, an internet service
provider (ISP), which collected the mail. Users in the former category have a mode of
communication which is close to instantaneous while those using an ISP may only communicate
as quickly as their telephone access, service provider and personal inclination dictate.”
So, in this concerned case, Bella Vista e-mailed AL sending the details of the steel to be
delivered which was acceptence to the offer in the agreement though the former did not sign it.
Hence, non payment of the consideration shall be considered as breach of the contract.
“The New Zealand Companies Act 1993 contains mandatory and default provisions. Many of
the default provisions relate to the statutory constitution of the company that generally affect its
internal management. In a broad sense, therefore, and assuming the conceptualisation of the
corporation that sits behind the paradigm is accepted, New Zealand companies fit broadly within
the Anatomy paradigm. But the only way New Zealand companies can achieve separate legal
entity is through an enabling statute – by complying with the requirements for registration found
in the Companies Act 1993. Section 15 of that Act states that a company is a separate legal entity
from its shareholders. The significance attached to the fact that companies can only achieve
incorporation and status as a legal person through a statute depends therefore on whether at a
fundamental level one considers modern companies to be primarily statutory or primarily
contractual.”
However, the contract includes the following Romalpha Clause “Title to the Goods shall remain
vested in Aluminium Ltd and shall not pass to Bella Vista Homes Ltd. (5379301) until the
purchase price for the Goods has been paid in full and received by Aluminium Ltd”. Hence, AL
is still legally rather contractually is the owner of the Steel.
Romalpha Clause:
“The use of ‘reservation of title’ clauses - or, as they are commonly referred to, ‘Romalpa
clauses’ - has been widespread in the sale of goods. Under this type of clause, the seller retains
ownership of the goods until they are paid for in full, but the buyer is allowed to take delivery of
the goods. If the buyer doesn't pay, the seller can therefore take possession of the goods. The
Romalpa clause avoids the presumption set down in the SALE OF GOODS ACT 1908 that
ownership of the goods passes to the buyer when they are delivered to the buyer. Before the
PERSONAL PROPERTY SECURITIES ACT 1999 (PPSA) came into force in 2002, the benefit
of a Romalpa clause to the seller was that if the buyer became insolvent before paying in full, the
seller could recover the goods, and did not need to go through the normal procedure to recover
the debt. This was because the seller still had ownership of the goods. The seller would therefore
have priority over banks and other creditors holding security interests, who would otherwise, if
ownership of the goods had passed to the buyer, have prevailed over the unpaid seller's right to
the price of the goods. However, the PPSA has eliminated this advantage of the seller retaining
ownership. Under this Act, the seller's interest falls within the broad definition of a ‘security
interest’ and must therefore be registered on the Personal Property Securities Register (PPSR) if

the seller is to be protected. If the seller does not register their interest, then other creditors of the
buyer who subsequently take security interests over the goods and register them will take priority
over the seller. For more on the PPSR, see How to register your security interest on the Personal
Property Securities Register if you're a creditor and How to check the Personal Property
Securities Register for money owed on property offered to you for sale.”
“The PPSA affects the question of priority between the seller and the buyer's other creditors. But
as between the buyer and seller, a Romalpa clause will continue to have effect, entitling the seller
to possession of the goods if they are not paid for in full, regardless of whether the seller's
interest is registered on the PPSR. The CONSUMER GUARANTEES ACT 1993 gives buyers
some protection against Romalpa clauses. The Act provides that for the clause to take effect, the
following two conditions must be satisfied:
 The buyer must have received oral advice, acknowledged by the buyer in writing, of the
way in which his or her right to undisturbed possession of the goods is affected by the
Romalpa clause. This oral advice must be sufficient to enable a reasonable consumer to
understand the general nature and effect of the clause.
 The buyer must also have received a written copy of the agreement for supply, or of the
part of the agreement that contains the Romalpa clause.
Other clauses that may protect the seller
In addition to a simple Romalpa clause, you as a seller may also include provisions so that you
are entitled to any proceeds if the buyer sells the goods to somebody else, or manufactures new
goods out of the original goods.
Cautionary notes
 Care is required both in drafting the Romalpa clause and in ensuring that the
requirements of the Consumer Guarantees Act are complied with. You should therefore
obtain the advice of a lawyer both for the drafting of the clause and also before you take
any action to recover the goods under the clause.
 The effect of a Romalpa clause may be complicated by the goods in question being
attached to real property (for example, if the goods are the joinery for a house). You
should obtain legal advice in those cases.”

Recommendations:
Remedies provided under Contractual Remedies Act, 1979 of New Zealand:
“If a contract expressly provides for a remedy in respect of misrepresentation or repudiation or
breach of contract or makes express provision for any of the other matters to which sections 6 to
10 relate, those sections shall have effect subject to that provision. Subject to sections 4 to 6, a
party to a contract shall not be precluded by the cancellation of the contract, or by the granting of
relief under section 9, from recovering damages in respect of a misrepresentation or the
repudiation or breach of the contract by another party; but the value of any relief granted under
section 9 shall be taken into account in assessing any such damages. Any sum ordered to be paid
by any party to the contract to any other such party under section 9(2) may be set off against any
damages payable by him to that other party. When a contract is cancelled by any party, the court,
in any proceedings or on application made for the purpose, may from time to time if it is just and
practicable to do so, make an order or orders granting relief under this section.”
“Meaning of shareholder
In this Act, the term shareholder, in relation to a company, means—
(a) a person whose name is entered in the share register as the holder for the time being of 1 or
more shares in the company:
(b) until the person’s name is entered in the share register, a person named as a shareholder in an
application for the registration of a company at the time of registration of the company:
(c) until the person’s name is entered in the share register, a person who is entitled to have that
person’s name entered in the share register under a registered amalgamation proposal as a
shareholder in an amalgamated company.”
“Meaning of director
In this Act, director, in relation to a company, includes—
(a) a person occupying the position of director of the company by whatever name called;”
and some other persons but not recievers, etc.
“Liability of shareholders
(1) Except where the constitution of a company provides that the liability of the shareholders of
the company is unlimited, a shareholder is not liable for an obligation of the company by reason
only of being a shareholder.
(2) Except where the constitution of a company provides that the liability of the shareholders of
the company is unlimited, the liability of a shareholder to the company is limited to—
(a) any amount unpaid on a share held by the shareholder, etc.
(3) Nothing in this section affects the liability of a shareholder to a company under a contract,
including a contract for the issue of shares, or for any tort, or breach of a fiduciary duty, or other
actionable wrong committed by the shareholder.”

“Separate legal personality
A company is a legal entity in its own right separate from its shareholders and continues in
existence until it is removed from the New Zealand register.”
“Director’s duty of care
A director of a company, when exercising powers or performing duties as a director, must
exercise the care, diligence, and skill that a reasonable director would exercise in the same
circumstances taking into account, but without limitation,—
a. the nature of the company; and
b. the nature of the decision; and
c. the position of the director and the nature of the responsibilities undertaken by him or
her.”
Also, section 76, 300 and 301 of the Act provides financial assistance, liability if proper
accounting reports not kept and power of court to require persons to repay.
“Contracts come in all shapes and sizes. Some are verbal, some written. Some are formal, some
informal. They all have 3 features in common:
 you make someone an offer
 they accept it
 and you promise to give something - usually money - in return for what you're getting.
The legal term for this promise is consideration.
When you enter a contract, you're bound by everything you've specifically agreed with the other
person or company. You might also be covered by terms and conditions that weren't specifically
mentioned but are, nevertheless, assumed under the law to be part of the contract.”
“The New Zealand Companies Act 1993 contains mandatory and default provisions. Many of the
default provisions relate to the statutory constitution of the company that generally affect its
internal management. In a broad sense, therefore, and assuming the conceptualisation of the
corporation that sits behind the paradigm is accepted, New Zealand companies fit broadly within
the Anatomy paradigm. But the only way New Zealand companies can achieve separate legal
entity is through an enabling statute – by complying with the requirements for registration found
in the Companies Act 1993. Section 15 of that Act states that a company is a separate legal entity
from its shareholders. The significance attached to the fact that companies can only achieve
incorporation and status as a legal person through a statute depends therefore on whether at a
fundamental level one considers modern companies to be primarily statutory or primarily
contractual.”
Under these legal clauses, the company LA has a right to recover the money. As AL has already
performed its part of the performance of the concerned contract, now the other company i.e.
Bella Vista is liable to pay the money accordingly.
Therefore, from every point of view, LA has the legal right to recover the money from the
directors and shareholders of Bella Vista.

PART: B
Q. Describes the experience of writing your executive summary and the process of research that
you undertook.
A. First of all, thank you for giving me this research topic and paving my way of knowledge
regarding the subject more. Executive summaries are a bit complex than that of writing essays or
doing other kind of academic projects, as it includes the techniques of writing important points in
brief and aptly to the point. So, it was a new and knowlegable experience to research and write
the executive summary. Executive summaries are crucial and important in nature for both the
readers and the writers. It is kind of a synopsis of the whole issue with the main points given.
The above summary is divided into the subject matter that explains the concerned case and the
issues to be solved, analysis that includes the law points, recommendations that has the solution
part having the remedies and a conclusion. It also includes the legal points the concerned country
i.e. New Zealan. I have researched it through reading online articles, news, cases and books
related to contractual laws in New Zealand. Writing this executive summary has developed my
knowledge of the subject and also has taught me how to write the thing properly.
As the USC librarians has defined executive summary as, “An executive summary is a thorough
overview of a research report or other type of document that synthesizes key points for its
readers, saving them time and preparing them to understand the study's overall content. It is a
separate, stand-alone document of sufficient detail and clarity to ensure that the reader can
completely understand the contents of the main research study.” “An executive summary,
or management summary, is a short document or section of a document, produced
for business purposes, that summarizes a longer report or proposal or a group of related reports
in such a way that readers can rapidly become acquainted with a large body of material without
having to read it all. It usually contains a brief statement of the problem or proposal covered in
the major document(s), background information, concise analysis and main conclusions. It is
intended as an aid to decision-making by managers and has been described as the most important
part of a business plan. An executive summary differs from an abstract in that an abstract will
usually be shorter and is typically intended as an overview or orientation rather than being a
condensed version of the full document. Abstracts are extensively used in academic research
where the concept of the executive summary is not in common usage. An abstract is a brief
summarizing statement... read by parties who are trying to decide whether or not to read the main
document, while an executive summary, unlike an abstract, is a document in miniature that may
be read in place of the longer document. Executive summaries are important as a communication
tool in both academia and business.”
However, the links and other references provided in the Problem itself have helped me in the
research proces. It has developed my research skill as well as penning down things briefly. Also,
in the whole process, I have been enlightened about the commercial relations between the
countries: New Zealand and Australia and also the legal comparatives are clear in the contractual
scenario.

References:
An Introduction to New Zealand Law & Sources of Legal Information. (n.d.). Retrieved from
https://www.nyulawglobal.org/globalex/New_Zealand.html
Contract law. (n.d.). Retrieved from
https://www.consumer.org.nz/articles/contract-law
Contractual Remedies Act 1979. (n.d.). Retrieved from
http://www.legislation.govt.nz/act/public/1979/0011/latest/DLM31566.html
Companies Act 1993. (n.d.). Retrieved from http://legislation.govt.nz/act/public/1
993/0105/188.0/DLM319570.html
Malcomm Burrows, Dundas Lawyers, What is Retentionof Title,
https://www.dundaslawyers.com.au/what-is-a-retention-of-title-rot-clause/
New Zealand Law Commission, http://www.nzlii.org/nz/other/nzlc/report/R50/R50-3.html#Heading333
Owen Hodge Lawyers, Breach of Contract, https://www.owenhodge.com.au/commercial-
litigation/breach-of-contract/
PAUL VON NESSEN AND ALAN COLLIER, THE PPSA: CONTINUING THE
RECONCEPTUALISATION OF RETENTION OF TITLE (ROMALPA) SECURITY:
http://www.austlii.edu.au/au/journals/UNSWLawJl/2011/25.pdf
How to Law, How to be aware of your rights under a NZ "Romalpa" clause ("reservation of title"
clause)

https://www.howtolaw.co/beaware-of-your-rights-under-a-romalpa-clause-392260
The Anatomy of Corporate Law in New Zealand. (2017, June 08). Retrieved from
https://www.law.ox.ac.uk/business-law-blog/blog/2017/06/anatomy-corporate-law-new-
zealand
Upcounsel, Romalpha clause: everything you needed to know, https://www.upcounsel.com/romalpa-
clause
USC Libraries, Organizing Your Social Sciences Research Paper: Executive Summary,
https://libguides.usc.edu/writingguide/executivesummary
Vannessa Swain, Damages: The most common remedy for the breach of contract
https://legalvision.com.au/damages-the-most-common-remedy-for-breach-of-contract/